[Article] Sunday Indo 27-01-2013 Revealed: huge inequity in rural/city property tax

The_Conductor

http://www.independent.ie/national-news/revealed-huge-inequity-in-ruralcity-property-tax-3367812.html

THE gross inequity of Finance Minister Michael Noonan's property tax is today laid bare as it has emerged Dubliners on the lowest rung of the property ladder will pay higher property tax than the owners of large four-bedroom mansions across rural Ireland.

One-bed apartment owners in the golden triangle of south county Dublin will be forced to pay on average €315 in property tax, higher or equal than that paid by the owners of large detached houses in 19 other counties outside the capital, a Sunday Independent national property survey published today reveals.

The figures have reignited angry calls this weekend from within Fine Gael to have the terms and scope of the property tax amended in the Finance Bill to address the "injustice inflicted on the people of Dublin".

Dublin South TD Olivia Mitchell said: "What is happening is that many young people who bought apartments at the peak, paid huge stamp duty and are now caught in negative equity will be subsidising those in country mansions. It is grossly unfair," she said.

According to our county-by-county analysis, owners of large homes in counties Mayo, Roscommon, Leitrim, Cavan, Longford, Westmeath, Offaly, Laois and Wexford will pay, on average, lower property tax than owners of the smallest apartments and houses in areas such as Stillorgan, Dalkey and Blackrock.

For example, owners of large four and five-bed houses in Taoiseach Enda Kenny's constituency of Mayo will pay a mere €225 a year in property tax, while people in the same-sized house in south Dublin will be forced to pay €945, a difference of €720 a year, our survey says.

But worse still, those who own large rural homes who will pay the €225 property tax will be charged €90 less than owners of small one-bedroom apartments or houses in south Dublin. While the figures contained in the survey are based on averages, the reality is that the owners of larger homes in Dublin will pay in excess of €1,000 every year in property tax.

In counties Kerry, Galway, Donegal, Monaghan, Limerick, Waterford, Tipperary, Sligo, Longford, Louth, Kilkenny, Meath and Carlow, owners of the largest properties will pay on average €315, the same as the one-bed apartment owners in south Dublin.

The survey examined the latest available sales data based on actual sales figures drawn from the Residential Property Price Register as well as information contained in quarterly reports on the property market by Daft.ie and MyHome.ie.

Reacting to the findings of our survey, angry Dublin Fine Gael TDs have reiterated their claims that what is being introduced is not a property tax but merely another form of income tax.

Dublin South TD Olivia Mitchell said: "We all know this so-called property tax is not a sustainable model for collecting money. These figures demonstrate clearly that the property tax is massively unfair."

She added: "I know the rural people have said they don't have the same services, and their subvention should come out from general taxation. This is not a property tax and the people of Dublin are being done a grave injustice."

Her colleague Eoghan Murphy, who represents the Dublin South East constituency, branded the property tax as a "deeply retrograde measure".

"This can in no way be perceived as fair, no way. It doesn't make any sense. I am all for a local services tax or charge, but this is just another form of income tax," he added.

"If this is going ahead, we must make allowance for those who paid stamp duty at the peak, but we must see exactly to what degree Dublin taxpayers will be subsidising those down the country."

Dun Laoghaire TD Mary Mitchell O'Connor said her major concern about the tax was for those who paid stamp duty at 9 per cent who would be burdened by this new tax.

She said: "This proposed tax takes account of people's ability to pay through a series of deferral arrangements but it does not take account of those who paid stamp duty of up to 9 per cent at the top end of the market. Many of those buyers had to borrow the money to pay that stamp duty. It would be galling if other counties did not pay and expected Dun Laoghaire residents to subsidise them."

Peter Mathews TD said many people in south Dublin simply won't be able to pay the tax or would have to sacrifice "dental work" for their children.

"I can see that there's going to be for those people who would in theory like to pay it, an inability to pay it. If you have a €650 after-tax bill on a modest enough house in south Dublin, that's a lot of money. Sure they're giving up things that they would have considered worth fighting for, things like dental correction work for children; all those things are being cut out," he said.

He added that owners of one-bed apartments in Dublin were far more likely to have borrowed heavily than owners of four-bed detached houses outside Dublin.

"You might find also that the income-generation capacity of the one-bed apartment owner is far more volatile than the owners of the four-bed house," he said.

In March, homeowners will receive correspondence from Revenue as to the amount of property tax they will have to pay when the tax comes into force in July. This year homeowners will only be liable for half of the full charge. The full tax will be levied from January 1, 2014.

- DANIEL McCONNELL and RONALD QUINLAN

Luca Brasi

Noonan, Hogan and Kenny are rural TDs. They are looking after their own. The Dublin TDs in Cabinet, Gilmore, Shatter etc are just incompetent puppets (and muppets).
As long as the people of Dublin take this inequity the Government will keep hitting them

Balmed Out

Dont understand why they are trying to make this a Dublin vs rest of the country issue as their are plenty of other areas with high prices.

Some of what their saying doesn't seem to have anything to back it up either I cant see how they work out that residents of Dublin were more likely to have paid stamp duty etc or that the income potential of a 1 bed apartment in Dublin is more volatile then that of a detached house in the west. That point especially seems very, very wrong.
Should someone who bought a house in Gorey and commutes to Dublin pay more then someone who bought a smaller house in Dublin for the same money? I would think rental value or house value is fairer then property size.

xper

I don't see any reference in the article to the methodology used in or raw data produced from their survey. We are just supposed to take their word on their interpretation of the survey results?

At the end of the day, this 'news' gets filed under the same heading as the stuff about house renovations/extensions possibly leading to higher liability for a property tax that is based on the property's market value. No **** Sherlock!

mrsdewinter

I love the way a one-bed apartment 'in the golden triangle of south Dublin' is the very lowest rung of the property market now.

The_Conductor

Personally I think a hybrid model which based the tax half on the floor area of the property, and half on its market value, would be the fairest way to go on this.

Irrespective of how the tax is imposed- it is going to be yet another subvention from Dublin and surrounding areas to the rest of the country- thats a given.

The idea behind this tax is that its supposed to be how the local authorities/county councils fund themselves going forward- and they have some leeway with this- they can vary it + or - 25% from the baselines given by the Revenue Commissioners. However, at the end of the day- its going into a central purse- so I can't say that my tax is not going to fund the streetlight outside my door- or local amenities- its going into an anonymous bucket for the benefit of god knows who, god knows where.

I also think that there should be cognisance given to those who live in leasehold as opposed to freehold property- but it would only get really really complicated then........

Regardless of how the tax is imposed- the implicit understanding of taxes is that they have to seen to be impartial- and the current proposals are not impartial- they implicitly target a specific segment of the population- those living in the Dublin area, over and above those in other areas.

Balmed Out

smccarrick wrote: »

Regardless of how the tax is imposed- the implicit understanding of taxes is that they have to seen to be impartial- and the current proposals are not impartial- they implicitly target a specific segment of the population- those living in the Dublin area, over and above those in other areas.

How so?
Could the same be said of any area where property values are above average?

I cant see any justification for a property tax being based on anything but value or perhaps rental value.
Areas with low property values have those values for a reason.

The_Conductor

Areas with lower property prices- tend to be areas with far lower net private sector debt, and lower negative equity associated with the properties. Basing the tax on a purely nominal value ascribed to a property gives no cognisance to whether the property is owned outright, in negative equity, whether the owner has the means to pay the property tax or indeed whether the owner is stuck in the property that is now unsuitable to their needs (think of all those Dublin apartments mentioned in the article that now have small children without any gardens or open spaces to play in).

So- it doesn't really matter whether you can pay the tax or not, whether you're in negative equity or not, whether you're on 1/4 the salary you were on 5 years ago or not, whether the property is saleable or not- we're going to assign a theoretical value to the property and you're going to pay this property tax based on the theoretical value, whether you like it or not.......?

Luca Brasi

Balmed Out wrote: »

How so?
Could the same be said of any area where property values are above average?

I cant see any justification for a property tax being based on anything but value or perhaps rental value.
Areas with low property values have those values for a reason.

Why not square footage? Of course that would then hit the cowboys who built standalone Southfork style mansions out in the sticks courtesy of dodgy planning decisions

Rereggie Perrin

smccarrick wrote: »

So- it doesn't really matter whether you can pay the tax or not, whether you're in negative equity or not, whether you're on 1/4 the salary you were on 5 years ago or not, whether the property is saleable or not- we're going to assign a theoretical value to the property and you're going to pay this property tax based on the theoretical value, whether you like it or not.......?

This does seem to be the only sensible way to do it. Your income tax is levied regardless of your financial circumstances, you pay VAT just the same, you pay duty on petrol regardless of how old or cheap your car is, or how much you owe on it...and so on and so forth.

And as stamp duty was taken from the pockets of the sellers (not the buyers) then we can shoot down the canard that those who bought during the bubble paid loads of tax and should get some sort of relief.

I would say, however, that a site value tax makes much more sense than the system they have plumped for - much easier to determine, and it doesn't discourage you from improving your home.

tenton

smccarrick wrote: »

She added: "I know the rural people have said they don't have the same services..."

not only that, but the land and property owners in Dublin beneffited from the same Dublin high prices when they sold. They cannot have it both ways. The sickening thing is that all the property tax is going to pay the sky high salaries and perks of people like the fine gael politicians quoted.
If decentralisation had happened the Dublin people there would be less people in Dublin, property prices would be lower there due to less demand, there would be less traffic, pollution and congestion in Dublin and everyone would be better off.

Rereggie Perrin

tenton wrote: »

not only that, but the land and property owners in Dublin beneffited from the same Dublin high prices when they sold. They cannot have it both ways. The sickening thing is that all the property tax is going to pay the sky high salaries and perks of people like the fine gael politicians quoted.
If decentralisation had happened the Dublin people there would be less people in Dublin, property prices would be lower there due to less demand, there would be less traffic, pollution and congestion in Dublin and everyone would be better off.

But of course Fianna Failure made a balls of that too, and cost us hundreds of millions in the process buying buildings and paying people to move, only to move back to Dublin again.

Balmed Out

Luca Brasi wrote: »

Why not square footage? Of course that would then hit the cowboys who built standalone Southfork style mansions out in the sticks courtesy of dodgy planning decisions

Most one off houses arent mcmansions and why do you think its fair to attack any particular group?

No one is forced to live anywhere, we all make choices. You can live in an urban area with the advantages of services, amenities etc or a rural area where you will have more space etc.
I think doing it on square footage would be akin to doing it based on the convenience of public services to your home, neither is fair.

tenton

Compared to the huge amounts squandered on government spending, property taxes will only yield a pittance. Some of the waste in government spending should have been tackled first.

Rereggie Perrin

tenton wrote: »

Compared to the huge amounts squandered on government spending, property taxes will only yield a pittance. Some of the waste in government spending should have been tackled first.

They should all be tackled, and should have been tackled during the good times to prepare for the rainy day.

cookie1977

Balmed Out wrote: »

Most one off houses arent mcmansions and why do you think its fair to attack any particular group?

No one is forced to live anywhere, we all make choices. You can live in an urban area with the advantages of services, amenities etc or a rural area where you will have more space etc.
I think doing it on square footage would be akin to doing it based on the convenience of public services to your home, neither is fair.

These services and amenities also cost money to use. There is a substantial penalty/bias against those properties located in Dublin and other major cities compared to the countryside. Either a combination of size and value or based on size alone is a fairer system.

There is also a demand for property in major cities because most jobs are located there. That does result in people being forced to live in them due to travel costs or lack of car/transport etc...

digzy

Rereggie Perrin wrote: »

This does seem to be the only sensible way to do it. Your income tax is levied regardless of your financial circumstances, you pay VAT just the same, you pay duty on petrol regardless of how old or cheap your car is, or how much you owe on it...and so on and so forth.

And as stamp duty was taken from the pockets of the sellers (not the buyers) then we can shoot down the canard that those who bought during the bubble paid loads of tax and should get some sort of relief.

I would say, however, that a site value tax makes much more sense than the system they have plumped for - much easier to determine, and it doesn't discourage you from improving your home.

one can make an arguement against this too. what if you happen to have a house and garden in an urban setting which may have a high site value but you cant afford to develop the site?

I believe that the system being implemented is the 'least unfair' of the options available -a bit like the leaving cert! personally I paid high stamp duty so I'd love an exemption, but if the powers that be cede to every 'interest group' they wont be taking in any money which is the point of the whole exercise.

At least with this tax the lads who've been dodging income tax-through honest and not so honest means- will have to pay their share. look at all the farmers who plough their profit back into their farms thus reducing their exposure. As an income tax payer who cant it, I'm happy to pay the property tax, even though it's through gritted teeth.

Rereggie Perrin

digzy wrote: »

personally I paid high stamp duty so I'd love an exemption

I hate to labour this point, but remember that the stamp duty you paid ultimately came out of the pocket of the person who sold you your place.

cookie1977

Rereggie Perrin wrote: »

I hate to labour this point, but remember that the stamp duty you paid ultimately came out of the pocket of the person who sold you your place.

That is semantics if I ever heard it, if not an oxymoron

Rereggie Perrin

cookie1977 wrote: »

That is semantics if I ever heard it, if not an oxymoron

It's not semantics, it's logic and economics.

cookie1977

Rereggie Perrin wrote: »

It's not semantics, it's logic and economics.

If a property costs me 500,000 euro and I buy it I actually pay 505,000 (at current stamp duty rates). Your logic is flawed.

Rereggie Perrin

cookie1977 wrote: »

If a property costs me 500,000 euro and I buy it I actually pay 505,000 (at current stamp duty rates). Your logic is flawed.

Wrong. Your property cost 505k, and you were willing to pay that for it. But the seller only sees 500k of the 505k. Whose pocket did the 5k come out of?

cookie1977

Rereggie Perrin wrote: »

Wrong. Your property cost 505k, and you were willing to pay that for it. But the seller only sees 500k of the 505k. Whose pocket did the 5k come out of?

My pocket mr. pedantic. The seller only wanted 500,000 the seller gets only 500,000 yet I have to pay 505,000

Rereggie Perrin

cookie1977 wrote: »

My pocket mr. pedantic. The seller only wanted 500,000 the seller gets only 500,000 yet I have to pay 505,000

The seller wants whatever the market can bear. The market can bear the cost + the taxes. If there was no tax, the property would still have gone for 505k and the seller would have got all of it.

cookie1977

Rereggie Perrin wrote: »

The seller wants whatever the market can bear. The market can bear the cost + the taxes. If there was no tax, the property would still have gone for 505k and the seller would have got all of it.

??? If the seller wanted 500,000 and there was no tax all they'd get is 500,000 and all I'd pay is 500,000.

JuliusCaesar

Rereggie Perrin wrote: »

I hate to labour this point, but remember that the stamp duty you paid ultimately came out of the pocket of the person who sold you your place.

Um, I definitely remember paying this - it came directly out of MY pocket. In fact I paid it twice, and was really ticked off when stamp duty rates were reduced. Unfortunately for me, my family needed a place to live, and couldn't wait for a possible reduction in SD rates.

Rereggie Perrin

cookie1977 wrote: »

??? If the seller wanted 500,000 and there was no tax all they'd get is 500,000 and all I'd pay is 500,000.

The seller doesn't want only 500k - he wants as much as he can get. You are willing to pay 505k, and he'd like to get all of it. Unfortunately, of the 505k you are willing and able to spend, the government is going to filch 5k of it. So of the 505k you are willing to and able to spend, he only sees 500k.

I hope that's clearer? It's counter-intuitive, I know.

digzy

Rereggie Perrin wrote: »

I hate to labour this point, but remember that the stamp duty you paid ultimately came out of the pocket of the person who sold you your place.

no it didn't. if a house sold, it made x amt of money. then one had to pay 3 or 6 or 9% stamp duty. therefore the house costs 1.03, 1.06 or 1.09 times the agreed sale price. However, stamp duty due was dictated by whether the house was new or if the purchaser was a first time buyer.

perhaps one can make a moot point that the buyer is prepared to pay between 1.03-1.09 times the eventual 'agreed sale price' anyway so thats where the seller lost out.However, that ignores the situation of the buyer, I mentioned above.

cookie1977

Rereggie Perrin wrote: »

The seller doesn't want only 500k - he wants as much as he can get. You are willing to pay 505k, and he'd like to get all of it. Unfortunately, of the 505k you are willing and able to spend, the government is going to filch 5k of it. So of the 505k you are willing to and able to spend, he only sees 500k.

I hope that's clearer? It's counter-intuitive, I know.

You're telling me that all sellers factor in the stamp duty when pricing houses? I dont think so. The price quoted or the price agreed to does not include stamp duty as the seller couldn't care less about it as the do not have to pay it. The buyer pays it. You can put what ever "spin" you like on it but it's the buyer that pays.

Rereggie Perrin

cookie1977 wrote: »

You're telling me that all sellers factor in the stamp duty when pricing houses?

No no no no - I'm telling you they want to get as much as they can for their property. That's all. They want the whole 505k.

Look at it like this:


Joe is selling his house. Stamp duty is at 10%. Due to the prevailing economic climate and bank lending practices, the top bidder is able to raise 500k to buy it. The seller gets 450k odd, and the government 50k odd.

The next week, the government announces stamp duty is to double. An identical house next door is for sale by a guy called Tom, and a guy who missed out on Joe's house is able to raise 500k to buy it. But due to the doubled stamp duty, now the government gets 100k odd of the money, and Tom only gets 400k.

Whose pocket did the stamp duty come out of? Any clearer?

cookie1977

Rereggie Perrin wrote: »

No no no no - I'm telling you they want to get as much as they can for their property. That's all. They want the whole 505k.

Look at it like this:


Joe is selling his house. Stamp duty is at 10%. Due to the prevailing economic climate and bank lending practices, the top bidder is able to raise 500k to buy it. The seller gets 450k odd, and the government 50k odd.

The next week, the government announces stamp duty is to double. An identical house next door is for sale, and a guy who missed out on Joe's house is able to raise 500k to buy it. But due to the doubled stamp duty, now the government gets 100k odd of the money, and the seller of the second house only gets 400k.

Whose pocket did the stamp duty come out of? Any clearer?

No, they asked for 500,000. If they wanted 505,000 and I agreed then I'd have payed €510,050.00. They'd have gotten their 505,000. Are you really holding on to this position?